Correlation Between Varta AG and China Oilfield

Can any of the company-specific risk be diversified away by investing in both Varta AG and China Oilfield at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Varta AG and China Oilfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varta AG and China Oilfield Services, you can compare the effects of market volatilities on Varta AG and China Oilfield and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Varta AG with a short position of China Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and China Oilfield.

Diversification Opportunities for Varta AG and China Oilfield

0.43

Correlation Coefficient

Varta AG  China Oilfield

Very weak diversification

The 3 months correlation between Varta and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and China Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Oilfield Services and Varta AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Varta AG are associated (or correlated) with China Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Oilfield Services has no effect on the direction of Varta AG i.e., Varta AG and China Oilfield go up and down completely randomly.

Pair Corralation between Varta AG and China Oilfield

Assuming the 90 days trading horizon Varta AG is expected to under-perform the China Oilfield. In addition to that, Varta AG is 2.54 times more volatile than China Oilfield Services. It trades about -0.02 of its total potential returns per unit of risk. China Oilfield Services is currently generating about 0.03 per unit of volatility. If you would invest  64.00  in China Oilfield Services on October 13, 2024 and sell it today you would earn a total of  22.00  from holding China Oilfield Services or generate 34.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Varta AG  vs.  China Oilfield Services

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Oilfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and China Oilfield

The main advantage of trading using opposite Varta AG and China Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, China Oilfield can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Oilfield will offset losses from the drop in China Oilfield's long position.

The idea behind Varta AG and China Oilfield Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.